Talk, but little action, to break U.S. grip on World Bank job

Emily Kaiser

6 Min Read

World Bank President Robert Zoellick attends a session at the World Economic Forum (WEF) in Davos, January 28, 2012. REUTERS/Christian Hartmann

(Reuters) - Emerging markets talked up their desire to break Washington’s hold on the top World Bank job on Thursday after Robert Zoellick announced he would step down, yet they showed little inclination to band together to force change.

Much like in 2011, when Dominique Strauss-Kahn resigned as managing director of the International Monetary Fund, officials from countries such as Brazil and the Philippines said it was time to break the decades-old pattern of putting an American in charge of the World Bank and a European atop the IMF.

“It is not so much the identity of Mr. Zoellick’s replacement that concerns us but rather the process in which his successor is selected,” said Philippines Finance Secretary Cesar Purisima.

“We are confident that given the increasing importance of emerging markets in the global economy, outdated practices of the past will be revisited,” he said.

However, there was not much evidence that emerging markets could field a candidate and build a coalition large enough to challenge the United States.

Zoellick will leave his post in June, when his term ends. U.S. Treasury Secretary Timothy Geithner said on Wednesday that Washington would put forward a candidate “in the coming weeks” and called for an open process to fill the job.

An emerging market official told Reuters there was an effort to pull together a campaign behind a non-U.S. candidate, but there was little enthusiasm because most countries were preoccupied with domestic issues, including impending leadership changes and battling the global downturn. The official declined to be named because of the sensitivity of the matter.

Indeed, the two people most often mentioned are both American: former U.S. Treasury Secretary Lawrence Summers and U.S. Secretary of State Hillary Clinton. The State Department said Clinton would not be taking the job.

If an emerging market rival does materialize, it may be someone from the same short list of names circulating last year after Strauss-Kahn’s resignation. South Africa’s Trevor Manuel and Mexico’s Agustin Carstens were among those mentioned.

Carstens, who heads up Mexico’s central bank, ruled himself out on Wednesday. He launched an unsuccessful bid against Christine Lagarde in 2011 for the top IMF role.

“I have no plans to launch a campaign for that (World Bank) job,” Carstens said.

WHO HAS THE POWER?

Unlike last year, when Strauss-Kahn abruptly resigned amid charges -- later dropped -- that he had assaulted a hotel maid, Zoellick’s departure was widely expected. That should have given emerging markets ample opportunity to plan for a rival bid to lead the lending institution.

The trouble is, forging consensus from such a disparate collection of countries is notoriously difficult.

Groupings such as the BRICS -- Brazil, Russia, India, China and South Africa -- have struggled to find much common ground on global development issues, making it hard for them to rally around a single candidate.

BRICS leaders are scheduled to meet in New Delhi in late March, and could conceivably put forward a candidate then. But if the United States has already presented its nominee by then, it may put any BRICS-backed candidate at a disadvantage.

The World Bank has taken steps to enhance emerging markets’ power and influence, commensurate with their growing economic clout -- a move that helps blunt criticism that it is too dominated by Western powers.

It endorsed a plan in 2010 that gave more voting power to developing countries, vaulting China to the No. 3 spot behind the United States and Japan.

Its chief economist is from China, and two of the three managing directors are from emerging markets -- Indonesia and Egypt. One of those managing directors is former Indonesian Finance Minister Sri Mulyani Indrawati, who could be another potential emerging markets candidate.

Under voting reforms approved in 2010, developing countries will hold 47.2 percent of World Bank voting power, a 3.1 percentage point increase from the previous tally.

But the five BRICS countries currently hold just 11.3 percent of the voting power, World Bank data shows, not enough to stand up to the United States’ 16 percent.

China, by far the largest of the BRICS, had little to say on the succession question.

Chinese foreign ministry spokesman Liu Weimin said only that the next World Bank president should be chosen “based on the principles of openness, competitiveness and merit.” That was similar to what China said during the IMF nominating process last year.

The Bretton Woods Project, an IMF and World Bank watchdog, sent a letter to World Bank governors arguing that the next president should have to secure votes from a majority of member countries, not just a majority of the total votes, which skews the balance of power toward large advanced economies.

“As the Bank only operates in developing countries, and has most impact in low-income countries, any candidate that was not supported by these countries would seriously lack legitimacy,” it wrote in the letter, dated February 15.